It's probably an understatement to say the biotechnology industry is enjoying impressive growth. More than 370 biotech drugs are in development, reports industry trade association BIO. With the science continuing to mature, it seems likely that a sizable proportion of these experimental medicines will receive regulatory approval. An important point, though, is that someone will actually have to produce them for the market.
Genentech (NYSE:DNA) is already a major symbol of the biotech industry's triumph. The company continues to expand the range of indications for its FDA-approved cancer medications, Avastin, Rituxan, and Herceptin. Most recently, Genentech disclosed that Lucentis, a treatment for age-related macular degeneration, performed well in phase 3 trials, a development that should position the firm well against competitors in that market, including Pfizer (NYSE:PFE) and Eyetech (NASDAQ:EYET).
With all of its success, Genentech needs a lot of bio-manufacturing capacity. Therefore, the firm's agreement to purchase Biogen Idec's (NASDAQ:BIIB) Oceanside, Calif., facility appears to make a lot of sense. Through the deal, Genentech will get an added 90,000 liters of production, bringing its total manufacturing capacity up to 370,000 liters.
What's significant about Genentech's manufacturing space, though, is that it amounts to a staggering 35% of the total global manufacturing capacity for protein medicines. And Genentech is far from done in building out its capabilities. The firm expects to complete an expansion at its Vacaville, Calif., site in 2009, and that will add another 200,000 liters in production capacity. Even assuming 10% annual global growth for the next four years, by 2009 Genentech will still control almost 37% of all capacity.
Of course, Genentech may very well use all of the space at its disposal. But the firm's manufacturing volume also could give it tremendous leverage in entering into partnerships with budding biotechnology companies that do not have large-scale production experience. Genentech's manufacturing footprint may give it more advantages than meet the eye.
Fellow Fool Charly Travers weighed in on recent developments in "Genentech Eyes a New Market."
Pfizer is a recommendation of our Motley Fool Inside Value newsletter. Take a free trial today by clickinghere.Fool contributorBrian Gormanis a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
